From the analysis of on-chain behavior, how low might BTC fall in the bull market under extreme circumstances? The overall logic is based on on-chain behavior analysis and historical data.
From the perspective of a short-term holder
Short-term holders are important participants in the transition from bull to bear market, so the performance of short-term holders has extremely important reference value in the bull market cycle.
As we all know, there were two terrifying black swan events in the last cycle, which also triggered a sharp drop in BTC prices. From the figure below, we can see that when the March 12 incident occurred, STH-MVRV was as low as 0.59; when the May 19 incident occurred, STH-MVRV was as low as 0.67. This means that on March 12, STH (short-term holders) suffered an average floating loss of 41%, and on May 19, STH (short-term holders) suffered an average floating loss of 33%. It can be seen how tragic the market was at that time.
There have also been three impressive market capitulation events in this cycle:
1. On March 10, 2023, Silicon Valley Bank collapsed, and the price of BTC fell from $25,000 to $20,000. During this period, STH-MVRV dropped to a minimum of 1.02;
2. On June 5, 2023, Binance was sued by the SEC. The price of BTC fell from US$30,000 to US$25,000. During this period, STH-MVRV dropped to a low of 0.95.
3. On August 17, 2023, it was reported that SpaceX sold $373 million worth of BTC, triggering long leverage liquidation, during which STH-MVRV dropped to a low of 0.91;
The STH-MVRV values under these special events correspond to the current BTC prices as follows:
STH-MVRV 0.59 = $37,979
STH-MVRV 0.67 = $43,129
STH-MVRV 1.02 = $65,659
STH-MVRV 0.95 = $61,153
STH-MVRV 0.91 = $58,579
When the market moves out of the bear market bottom range, we can evaluate the volatility of market sentiment through the performance of STH-MVRV. The depth of STH-MVRV retracement also reflects the influence of the event that caused the BTC price to fall.
For example, the COVID-19 pandemic swept the world in 2020, and the impact of the March 12 incident on the risk market was equivalent to a magnitude 9 earthquake. I believe that in this round of bull market cycle, based on the current situation that can be predicted, the probability of a black swan event of the same level (affecting human survival) occurring again is almost zero. Therefore, it can be inferred that STH-MVRV will not reach 0.59, that is, the price of BTC will not reach 37,979 (which can be ignored);
The cause of the 5.19 incident was a panic caused by the withdrawal of mining companies. Although it was also a black swan, it was not to the extent of "life-threatening". Therefore, STH-MVRV was as low as 0.67, which was obviously better than the situation at 3.12. Therefore, I think that if the risk market shock caused by the US economic recession is similar to the level of 5.19 at most. If this is used as a metric, the limit of BTC price retracement in this bull market cycle is around 43,129.
The current market's expectation of the Fed's postponement of interest rate cuts and the possibility of only one rate cut this year should have a similar impact on the crypto market as the "Silicon Valley Bank bankruptcy" and "Binance FUD" events. Therefore, BTC is more likely to be in a wide range of 60,000-64,000 USD and 66,000-70,000 USD).
To sum up, we can draw some conclusions:
1. Under the premise that no super black swan event occurs, even if BTC is affected by other macro factors, the maximum retracement value will not be lower than 43,000-44,000;
2. The influence of the so-called super black swan must reach a major level that challenges human life (such as a nuclear war between Russia and Ukraine); obviously, "US economic recession" is not enough.
3. Since it is a limit value, it means "it is unlikely to reach" rather than "it may reach".
In addition, let's make a longer-term prediction: even at the bottom of the next bear market cycle, the lower limit of BTC will get higher and higher as time goes by. It is not easy to see a big cake below 30,000 or 20,000. If the cost of the BTC you hold is below this, please cherish it.
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